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USURY LAW OF 1837. 



Practices and Experiences under the New- York Usury Law of 1837. 



For years past, small borrowers have been in tbe practice of paying 
seventeen per cent, per annum, on mortgage of real estate, in this 
manner : 

Some of our land associations and building mechanics, having small 
vacant lots on Long Island, in the vicinity of Brooklyn, worth $150 
each, would borrow $100 on each, at the rate of seven per cent, per 
annum, then give a deed, as security, conditioned to come back on 
payment of the loan; then the borrower would hire, at ten dollars per 
annum, the lots that had just been deeded {nominally) to the lender. 
He had no use for said lots ; but both parties go into these complicated 
transactions, as a sxqiposed cover to the evasion of the usury laws, thus 
paying seventeen per cent, per annum. 

Another way of pretended evasion is as follows : 

A lawyer of my acquaintance received the sum of $10,000 from one 
of his clients in the country, during one of our pressures, to be loaned 
out upon some good real estate security, in New- York or Brooklyn. 
He soon found a customer who would take the amount. He gave a 
bond and mortgage at twelve months, to double the amount, drawing 
interest at seven per cent, per annum ; then paid one thousand dollars 
fee for " making the searches." Thus the borrower paid seventeen per 
cent, per annum, in spite of the usury law. Since this occurrence, I 
find there have been hundreds upon hundreds of such instances ; indeed, 
I have just been told by a Wall-street gentleman, who has been, the 
past twelve months, constantly taking money on mortgage, as an agent 
for other parties, that the very lowest bonus he has paid on a twelve 
months' mortgage, has been five per cent, on amount loaned, and from 
that up to ten and fifteen per cent. 

The next mode we will notice, is where borrower and lender meet 
in some room, where they have a fictitious seller and a fictitious buyer 
of merchandise. The borrower wants to raise $800 in money, for 
three months. He purchases something of A., to the amount of $1,000, 
and gives his note for that amount, at three months, and then sells the 
same article, right there, on the spot, to B., for $800 cash. Thus he 
pays over eight per cent, a month for money. 

As soon as the borrower is out of sight, the buyer and seller of raer- 



II I*/ ^7"T I 

chandise restore things as they were prior to the introduction of their 
victim. 

In one instance I was told of a poor segar manufacturer paying, in 
this way, $15 for the use of $50 for thirty days ! He wanted the 
money to purchase some peculiar kind of tobacco, for fancy wrappers 
for a lot of segars, to be delivered within a certain time ; and this loan 
secured him (gave the means of securing) a clear profit of $100. The 
lender said he could have given the money for a compensation of $2, 
but for the usury laiv. 

One of the ways cf evading usury laws in Wall-street, is for the 
borrower upon stock security to sell his stock to a lender, at the cash 
price of the day, and then buy it back immediately from the same 
party, upon thirty to sixty days' credit, at such additional price as will 
yield any rate of extra interest that may have been agreed on between 
the parties. 54942 

This last mode of evading the law is getting so common, and is so 
easily seen through, that our money dealers are becoming more and 
more afraid of it, and, of course, charge more and more, to cover the 
risks of illegality. 

Notes are being made here all the time, in a tight money market, 
and are being sold at from one to three per cent, a month ; and thou- 
sands upon thousands of dollars are being loaned here, in a pressure, 
at one quarter per cent, a day. There are very many other ways in 
which the pretended evasion is carried on. 

I say "pretended" because, under decisions of the courts, "no 
device or mental reservation" shall avail in defence, and where 
both parties can be examined under oath as witnesses, no lender 
upon usurious interest, either upon stock as above named, or in 
any other way, can save himself, unless there is some false swearing, 
or some departure from duty on the part of the prosecuting attorney, 
or on the part of the judge or jury. Illegal, demoralizing dodging has 
been practiced somewhere by somebody. 

I cannot better illustrate the estimation in which the danger of legal 
entanglement is held, than to cite an instance which occurred not 
long since. The case was this : Some notes against a man of well- 
known wealth were known to have been issued for a bona fide pur- 
chase of property, and those notes were sold during a very tight money 
market, at ten per cent, per annum ; whilst, on the same day, notes 
against the same man, supposed to be " made paper," to carry out an 
operation, were sold at eighteen per cent, per annum. 

Thus we see that the man under the so-called "protection" of the 
usury law had to pay almost twice as much as the man paid who was 



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